Guangdong Lingxiao Pump IndustryLtd (SZSE:002884) Is Due To Pay A Dividend Of CN¥1.00

Guangdong Lingxiao Pump Industry Co.,Ltd. (SZSE:002884) has announced that it will pay a dividend of CN¥1.00 per share on the 16th of May. The dividend yield will be 4.5% based on this payment which is still above the industry average.

View our latest analysis for Guangdong Lingxiao Pump IndustryLtd

Guangdong Lingxiao Pump IndustryLtd's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend made up a very large portion of earnings and also represented 92% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

The next year is set to see EPS grow by 40.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 71%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Guangdong Lingxiao Pump IndustryLtd Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. Since 2018, the annual payment back then was CN¥0.223, compared to the most recent full-year payment of CN¥1.00. This means that it has been growing its distributions at 28% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, Guangdong Lingxiao Pump IndustryLtd has only grown its earnings per share at 5.0% per annum over the past five years. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

Our Thoughts On Guangdong Lingxiao Pump IndustryLtd's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Guangdong Lingxiao Pump IndustryLtd is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Guangdong Lingxiao Pump IndustryLtd that investors should know about before committing capital to this stock. Is Guangdong Lingxiao Pump IndustryLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.